Infosys Third-Quarter Profit Rises 33%, Cuts Forecast

Infosys Technologies, India's No.2 software services exporter, beat expectations with a one-third rise in quarterly profit on Tuesday, but cut its annual forecast as a global downturn squeezes outsourcing and prices.

Infosys, which develops applications, designs supply chains and offers back-office services to companies around the globe, forecast revenue for the year to March would grow 11.8-12.8 percent in dollar terms, down from October's forecast of 13.1-15.2 percent.

It its earnings per share forecast was trimmed to $2.23, down marginally from $2.24 projected in October.

Bangalore-headquartered Infosys cut its earnings forecast for a second quarter running as major Western clients battle weakening economies.

"In a challenging environment, our focus is on creating value for clients, running an optimized business, and evolving our business model that will allow us to emerge stronger when global economy starts recovering," Chief Executive Officer S. Gopalakrishnan said in a statement.

Infosys , which is also listed on Nasdaq, said October-December net
profit rose to 16.41 billion rupees ($336.3 million) from 12.31 billion rupees a year earlier.

A Reuters poll had forecast Infosys, whose clients include Goldman Sachs and Philips Electronics, would post a net profit of 15.37 billion rupees on revenue of 57.11 billion rupees.

Global companies such as Citigroup, Nortel and Airbus have outsourced work, taking advantage of India's large pool of English-speaking engineering workers and cheaper wages.

But a recession in the United States, which accounts for more than half the sector's revenue, and turmoil in the global financial sector have halted the sector's scorching pace of growth and battered stocks.

And last week's revelations of overstated profits and fictitious assets at fourth-ranked Satyam Computer Services have added to the pressure on the $52 billion information technology and back-office outsourcing sector.

Last month, India's technology industry lobby group said the sector faced an uncertain four to six quarters, and any clarity on business momentum would only be apparent in the first quarter of 2009/10 beginning in April.

Analysts said global firms, scared by the revelations of fraud at Satyam, might delay giving large contracts as they step up due diligence.

The Indian government has dissolved Satyam's board and appointed a three-man team after former chairman Ramalinga Raju, in a stunning resignation letter, confessed that profits had been falsified for years.

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Shares in Infosys, value at $14 billion, fell 20 percent in the December quarter, while the sector index slipped 28 percent and the main Mumbai index dropped by a quarter.

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